Venoco’s Ellwood Onshore Facility (EOF)

Paul Wellman

Venoco’s Ellwood Onshore Facility (EOF)

Venoco Declares Bankruptcy

Plummeting Oil Prices and Pipeline Closure Force Company to Take Billion-Dollar Shave and Haircut

Venoco oil company filed for Chapter 11 bankruptcy protection March 18, along with an announcement that its senior creditors had agreed to shave a good $1 billion from its current debts. Venoco stated in its press releases that plenty remained in the kitty to pay continuing obligations like salaries, royalty payments, and regulatory filings, and that it would be back on its feet after the “several months” the restructure is expected to take.

“While we continue to be in a strong cash position,” Mark DePuy, Venoco’s CEO, is quoted as saying, “the declining price of oil and the ongoing closure of Plains All American pipeline 901 continue to be serious problems.” The bankruptcy documents state Venoco began a restructure plan as early as November 2014, when it had $840 million in outstanding debt. As early as August 2014, the company announced it was selling its West Montalvo oil field for $200 million — a tract that produced about 20 percent of the company’s total barrels — in order to shed debt.

Following May 2015’s Refugio Oil Spill, Venoco’s quarterly report showed a drop in production of 24 percent between March and June 2015, from 5,718 barrels per day to 4,337. The company blamed the pipeline shutdown for a loss of “more than 50% of Venoco’s production” when it announced it was not making its semi-annual interest payment in February 2016. Crude oil prices have dropped precipitously since a high of $145 a barrel in 2008 to its current low of $41, plunging by half from 2014-2015 alone.

The Wall Street Journal reported on Monday that large Venoco creditors Apollo Global Management and Candlewood Investment Group LP have backed the restructuring plan. Venoco’s major creditors will be taking majority interest in the company in exchange for the debt forgiveness. Delaware Bankruptcy Court Judge Kevin Gross stated he’d allow Venoco to draw on $35 million in bankruptcy financing from Apollo-affiliated funds and would consider the loan’s approval at an April 21 hearing in Wilmington, according to the Journal.

Venoco is not alone in its problems. Multiple media reports forecast dozens of oil company bankruptcies when crude hit $28 a barrel in January. Venoco has operated in California for more than two decades, with a regional office in Carpinteria and headquarters in Denver, Colorado. Its oilfields include the South Ellwood tract’s Platform Holly, Beverly Hills, San Joaquin Basin, and platforms Gail and Grace offshore Port Hueneme. DePuy announced founder and executive chairman Tim Marquez will see the company through its debt readjustment.

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